October 25 (SeeNews) - The prolonged impact of the war in Ukraine may negatively affect Bosnia and Herzegovina's aggregate demand due to reduced consumer and business confidence, as well as exacerbate domestic political tensions, the World Bank said.
The EU's slower economic recovery and negative developments in the bloc's labour market could also limit the inflow of remittances to Bosnia, which support private consumption, the World Bank said in its latest Western Balkans Regular Economic Report released on Monday.
Potential political tensions could slow the implementation of the much-needed structural reforms in the country, the global lender said.
Inflationary pressures are expected to last longer than previously expected due to the disruptions in the energy market as a result of the war in Ukraine. Bosnia's inflation is expected to reach 11% in 2022, before it stabilises around 2% or lower in 2023 and 2024, according to the report.
The World Bank added it expects Bosnia's economic output to increase by 4% in 2022, after growing by an estimated 7.5% in 2021.
The impacts of the ongoing war in Ukraine is also affecting the other economies of the Western Balkan region, which are faced with increasing energy and food prices that erode purchasing power and business confidence. Furthermore, the labour market in the region is beginning to cool, with employment slowing amid the high inflation and increased uncertainty, the World Bank said in a statement after releasing the report.